IRA Q&A

If you’re thinking about putting money away for retirement, you may be wondering if an IRA is right for you. Below are answers to several common questions about IRAs to help you get started.

What is an IRA?

IRA stands for “individual retirement arrangements” or “individual retirement account.” An IRA is an investing account that you can open yourself to start setting aside money for retirement. Unlike brokerage accounts, IRAs have specific rules for contributions, withdrawals, and tax benefits intended to encourage long-term saving.

How is an IRA different from a 401(k)?

The key difference is that you can open an IRA with a financial institution yourself, while 401(k)s are generally offered through your employer. An IRA may allow you to have more investment options, but a 401(k) lets you contribute higher amounts of money each year.

Can I open an IRA even if I already have a 401(k)?

Yes, you can contribute earned income to both an IRA and a 401(k), but this may impact what type of IRA you choose.

What are the benefits of an IRA?

IRAs offer tax advantages that aren’t available with many other methods of investing. These advantages vary depending on which type of IRA you choose.

What’s the difference between a traditional IRA and a Roth IRA?

Income you contribute to a traditional IRA may be fully or partially tax-deductible (if you’re not covered by a workplace retirement savings plan or meet the income criteria), meaning you wouldn’t pay taxes on it now when you contribute. But, you do have to pay income taxes when you withdraw the money in retirement.

On the other hand, Roth IRA contributions are not tax-deductible now. However, you can withdraw the money tax-free in retirement and never have to pay any taxes on the growth of your investments if you meet basic qualifications (usually that you’ve had the account for 5+ years and are over 59½).

Read more: Traditional IRA vs Roth IRA--breaking down the differences

Who can open an IRA?

Anyone who earns taxable income is allowed to contribute to a traditional IRA. However, there are income limits to be eligible to contribute to a Roth IRA—for 2025 those limits range from $150,000 to $165,000 if you’re single, and from $236,000 to $246,000 if you’re married and filing jointly. For 2026 those ranges bump up to $153,000 to $168,000 and $242,000 to $252,000.

How much money can I contribute to an IRA each year?

You can contribute up to $7,000 total to IRA accounts for 2025. But if you’re at least 50 years old, that number increases to $8,000. For 2026 the numbers are $7,500 and $8,600.

Can I contribute to more than one IRA?

Yes, you can contribute to multiple IRAs in the same year, but the total amount can’t exceed the limits mentioned above.

When is the deadline to contribute to an IRA?

The deadline to contribute to an IRA for the prior year is on or around April 15, the same date that income taxes are due. This means that if you’d like to potentially make a tax-deductible contribution to an IRA for 2025, you have until Tax Day of 2026 to do it.

What happens if I contribute too much money to an IRA?

If you mistakenly put too much money into an IRA (or contribute if you’re not eligible) in a given year, you have until the tax filing deadline to remove your excess contributions and any investment earnings from them. If you don’t, you’ll pay a 6% penalty on that money each year until you take it out of the account.

You may also have the option to recharacterize contributions (for example, switch them to a traditional IRA if you're ineligible for a Roth), or potentially apply them to the following year.

What can I invest in with an IRA?

Once you’ve opened an IRA and started contributing, it’s important that you take the time to decide how you’d like to invest it. Some options include stocks, index funds, or other ETFs.

What if I need to take money out of my IRA before retirement age (59½)?

With a traditional IRA, if you withdraw any money before turning 59½ you are typically subject to a 10% early-withdrawal penalty,* as well as income taxes on your withdrawals.

With a Roth IRA, you’re allowed to withdraw money you contributed at any time with no tax or penalty. You can withdraw earnings tax-free and penalty-free once you turn 59½ (and in some other specific circumstances), as long as 5 years have passed since your first Roth IRA contribution. Otherwise, you may be subject to a 10% tax penalty for withdrawing earnings.

What happens to an IRA if the account holder passes away?

When you open an IRA you have the option to add beneficiaries—people who will inherit the account. If you pass away, beneficiaries can open what’s called an inherited IRA to take over the account. Inherited IRAs have different rules than standard traditional and Roth IRAs.

How much money do I need to invest in an IRA?

No matter how small the amount, putting money in an IRA may help you better prepare for the future. With the Plynk app, you can invest in an IRA with as little as $1.

Next step to consider

Check out IRAs in the Plynk app.